exchange rate risk

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Exchange rate risk

Also called currency risk; the risk that an investment's value will change because of currency exchange rates.

Foreign Exchange Risk

The risk that the return on an investment may be reduced or eliminated because of a change in the exchange rate of two currencies. For example, if an American has a CD in the United Kingdom worth 1 million British pounds and the exchange rate is 2 USD: 1 GBP, then the American effectively has $2 million in the CD. However, if the exchange rate changes significantly to, say, 1 USD: 1 GBP, then the American only has $1 million in the CD, even though he/she still has 1 million pounds. Foreign exchange risk is also called exchange rate risk.

exchange rate risk

References in periodicals archive ?
1 2 3 Long-term currency derivatives are 50% 7% 7% not offered to the company Long-term FX exposure cannot be 45% 14% 13% hedged using derivatives The company does not prioritise 31% 15% 18% hedging long-term exchange rate risk Accounting practices for currency 48% 18% 12% derivatives make them difficult to use Bank prices for long-term currency 30% 19% 20% derivatives (price, spread or premium) are too high Banks require credit assurance 41% 22% 15% for long-term currency derivatives which makes them difficult to use Percentage share of response on scale from 1 to 5 (1=strongly disagree; 5=strongly agree) To what extent do the following statements apply to your company?
Exchange rate risk may come into play when assessing market opportunity; but it does not appear to be, in and of itself, a deterrent to investment, except in the case of outright currency crises.
He added that the rupee loans provide the ''most effective protection'' against exchange rate risk, particularly as most ADB-financed projects generate revenues in local currency.
Northern Ireland companies will be affected by the changes, because if they buy products priced in euros, the exchange rate risk may be transferred to them.
Banks and insurance companies have been weakened by an effective lack of shareholders' equity, and are unable to take on risk, particularly exchange rate risk.
So what forms of corporate exchange rate risk are multinational companies most likely to encounter, and what are the implications for corporate management?
The system I use to translate theory into measurement consists of three modules designed to summarize exchange rate risk, economic policy risk, and institutional risk.
dollars places the responsibility for exchange rate risk on the foreign operation.
Currency union eliminates internal exchange rate risk, not default risk.
Thus, the Federal Reserve--the historical umbrella supervisor--also has found it necessary to concentrate more on the process that banking organizations use to manage market, credit, operating, and exchange rate risk, and less on the traditional after-the-fact evaluation of balance sheets that can, and often do, change dramatically the day after they have been reviewed by the supervisors.
However, some of the rise in the external borrowing is due to better access of the private sector to external markets due to the elimination of foreign exchange rate risk following the adoption of the dollarized regime in 2001.
oThe daily high demonstrates the increased demand among our global members and their commercial and investor clients to manage their exchange rate risk or gain exposure to the Indian rupee,o said Eric Hasham, DGCX Chief Executive Officer.